Credit Cards Tax Waiver: Waiting for Godot

This is one interesting question: Will customers have to pay the RM50 service tax on principal credit cards or can it be absorbed by the banks that issue them?

Cardholders have been asking this question since the announcement of the service tax in the Budget last week. Banks are unable to give any as they await guidelines from Bank Negara.

The Association of Banks is expected to meet Bank Negara soon over the guidelines and to voice the concerns that have arisen from the RM50 service tax, which was first imposed in 1997 and abolished in 2001.

Meant to “promote prudent spending”, the tax – RM50 on each principal credit and charge card and RM25 for supplementary cards – has certainly riled millions of credit card users who on average, have two to three cards. Some have more than half a dozen, including co-brand cards between banks and retailers, airlines and hypermarkets.

Bank Negara’s Credit Counselling and Debt Management Agency (AKPK) believes that the measure will encourage individuals to use the few credit cards in their possession instead of signing up for many but not using them all. It will also discourage the use of cards as a source of easy credit and reduce credit card debt problems.

There are currently 9.8 million principal and 1.3 million supplementary credit cards issued at the moment, according to statistics from Bank Negara.Going by these figures, the Government stands to earn about RM555mil every year from the soon-to-be re-imposed tax.

As such, it is unlikely that banks will be able to absorb the service tax across the board and it would also defeat the purpose of getting customers to feel the pinch.

There are operational issues on the implementation of this 'unhappy' tax.

Will the card holder be taxed RM50 per principal card on Jan 1 or only when his card is up for annual fee payment or renewal, which may, for example, be in September?

If the cards are all issued by one bank, can the customer pay RM50 (per customer per bank) instead of per card per bank?

How much time will those who need to settle their credit card debt be given to clear the outstanding amount before canceling their card?

Whichever way you look at it, no government is going to allow an easy RM555 million slip through their fingers. Also, do not be gullible to expect 'money-grabbing' banks to absorb this hugh deluge of "indirect tax paying" for you!

As far as I can see it,start reviewing the cards in your wallets. If there are those that have to go, they will have to go. Do not wait for Godot.

Where are my scissors?

Credit Cards-Just Use the Scissors!

If credit card issuing banks, marketing agencies for credit cards and card holders expects the government to buckle and withdraw the RM50 tax soon, think thrice!

As early as yesterday,30 October, PM Najib affirmatively said there will be no immediate plans to revise the RM50 annual service tax on credit and charge cards.

Najib said it was too soon to talk about any revision as the matter was just recently announced in the 2010 Budget.

“Tunggulah dulu (We wait first). The Government also needs revenue. If we can’t hike up (the price of) anything, susah kita (it would be hard for us).

“Who is going to fund the nation’s development?”

Najib announced the proposal to impose a service tax of RM50 for each main credit and charge card, and RM25 on supplementary cards in his 2010 Budget.

If implemented, financial analysts predicted that at least 30% of the holders of 11 million cards in circulation who have more than one card will have to pay RM100 every year.

It was reported in The Star yesterday that applications for new credit cards dropped by 80% following the Government’s an-nouncement of the service tax starting next year.

For those having more than two cards,review the cards in your possession and cancel them.

Looking for the scissors is the best bet yet!

China: A Bumpy Ride Ahead

This is certainly true-a gradual global economic recovery will help Chinese exports grow again. However, a statement from China’s Commerce Ministry said;"there are still many uncertainties and any recovery will be “hard and tortuous”.

Exports in September were 15.2 per cent below their level a year earlier, beating forecasts of a 21 per cent fall, though the government expects a double-digit fall for all of 2009.

In a statement released late yesterday on the ministry’s website, it said the full-year fall in exports compared with the previous year should be less than 20 per cent.

“In 2010, the world economy will hopefully see a gradual recovery, and the environment for Chinese trade will gradually improve,” it said.

“But as there is not yet sufficient strength in the global economic recovery, many problems and contradictions have yet to be resolved. The recovery will be hard and tortuous, and it will be hard to see an sustaining recovery in international demand in the short term.”

Net exports shaved 3.6 percentage points off GDP growth of 8.9 per cent in the third quarter as Chinese manufacturers continued to reel from a slump in global trade.

"Protectionism and increasing competition are main issues of concern", the ministry said.

“At present some nations are conducting probes into Chinese goods, which is causing yet further obstruction for a recovery in Chinese exports,” it said.

A US trade panel yesterday approved the eighth government investigation this year into charges of unfair Chinese pricing practices in a case in which US companies want a nearly 100 per cent duty or more on US$382 million (RM1.3 billion) of imported steel pipes.

Still, there were signs for optimism, the ministry added.

The government will conntinue to provide help to exporters in the form of export tax rebates, and numerous new markets awaited Chinese firms.

“There is a bright future for developing trade with newly emerging markets,” it said.